Tax News & Views Will Not Withhold Cheesecake Roundup

Taxpayers should check their withholding now to prepare for next year - IRS:

Proper tax withholding now is key to avoiding surprises when taxpayers file next year. Making any needed adjustments early means taxpayers won’t have to make a big change later in the year to catch up.

The IRS Tax Withholding Estimator is a free online tool that helps workers, independent contractors and retirees determine if they have the right amount of federal income tax withheld from their paychecks. Using it can prevent taxpayers from having an unexpectedly large tax bill or a substantial refund when they file in 2026.

Once I had a client couple who owed money at tax time every year. They implied that it was somehow my fault. Every year I noted that they were under-withheld based on their income. They never fixed the withholding. Don't be like that.

If you have significant non-withheld income - from investments, or a K-1, or gig work, for example - you need to either boost your withholding to cover that or start paying estimated tax payments.

Today in IRS turmoil

IRS turmoil: Leadership churn, worker exodus and threats to groups’ tax-exempt status roil agency - Fatima Hussein, Associated Press:

The agency shuffled through three acting directors over the course of a week. It’s preparing to lose tens of thousands of workers to layoffs and voluntary retirements. And President Donald Trump is weighing in on which nonprofits should lose their tax-exempt status, an incursion into the agency’s typically apolitical stance that threatens to further erode trust in federal institutions and weaponize enforcement efforts.

...

The Trump administration is also watching out for allies of the president.

Treasury official David Eisner sent an email in March to a top IRS official regarding Mike Lindell, the founder of MyPillow and one of the chief proponents of the lie that the 2020 election was stolen from Trump.

“The ‘My Pillow guy’ and a high-profile friend of the President recently received an audit letter, from what I understand, his second in two years,” Eisner wrote in the email, which was viewed by the AP. The president “is concerned that he may have been inappropriately targeted,” Eisner wrote.

TIGTA Probes Mass Firings, Not Exec Branch Contact Log - Tyrah Burris, Tax Notes ($):

President Trump has publicly questioned Harvard University’s tax-exempt status and directed similar attacks against a government ethics watchdog that has challenged him in court. It’s unknown if White House officials have contacted the IRS via other means.

Requests to IRS employees regarding tax matters can activate confidentiality laws if they are deemed to be misconduct, said Melissa Wiley of Kostelanetz LLP. The IRS Restructuring and Reform Act of 1998 gives TIGTA authority to audit communications between IRS employees and executive branch officers regarding specific return information. IRS employees are required to report any improper requests to alter or stop audits, logging them and reporting them to TIGTA.

Section 7217 says that no “applicable person” may request, directly or indirectly, that the IRS conduct an audit or investigation of a taxpayer. Applicable persons include, among others, the president, the vice president, any employee of the executive office of the president, and any employee of the executive office of the vice president. The prohibition doesn’t apply to a request for audit or investigation by the Treasury secretary resulting from a tax policy change.

Treasury Still Deciding Direct File’s Fate - Benjamin Valdez, Tax Notes ($):

Treasury said it’s still weighing the future of Direct File and called it a “failed program” that serves a small percentage of taxpayers.

“No decisions on the future of Direct File have been made as of yet,” a Treasury spokesperson told Tax Notes April 22, adding that it’s a “failed program at a cost of tens of millions of taxpayer dollars per year.”

Sounds like an entirely objective and dispassionate review of the program is in store.

Summers Says ‘Attack’ on IRS May Risk a $1 Trillion Revenue Hit - Christopher Anstey, Bloomberg via MSN. "Former Treasury Secretary Lawrence Summers said that the Trump administration’s moves to downsize the Internal Revenue Service, along with other changes, are likely to incentivize reduced tax-payment compliance — potentially costing the federal government $1 trillion in lost revenues over a decade."

Trump is crippling the tax police - Matthew Yglesias, Slow Boring. "The short-term upshot of this is going to be less tax enforcement and more people getting away with cheating."

Today in Tariffs

US court keeps Trump tariffs in force against group of small businesses - Dietrich Knauth, Reuters.

A group of five companies sued the Trump administration last week, in one of five lawsuits arguing that the president had overstepped his authority when he imposed sweeping tariffs on foreign trading partners.

The small businesses had asked for a temporary restraining order to immediately block the tariffs, but a three-judge panel of the U.S. Court of International Trade ruled that the tariffs can remain in place while the lawsuit proceeds. The panel will instead hear arguments over a proposed longer-term pause for the tariffs at a May 6 court hearing in Washington, D.C.

Are the Trump tariffs legal? - Ankush Khardori, Politico. "The White House’s legal rationale behind its action is far weaker than you might have imagined."

Amazon and Walmart sellers hoard goods in Canada to wait out tariffs; Third-party vendors are betting that White House will back down on steep China levies - Rafe Uddin, Financial Times:

Independent vendors who sell products — from cheap dog toys to appliances — through the companies’ US ecommerce platforms are shifting goods from China to Canadian warehouses, according to half a dozen sellers, logistics providers and consultants.

Several makers and distributors of Amazon’s and Walmart’s own products, as well as suppliers to companies such as Disney, are also using the tactic, some of the people said.

The Clues to Trump's Future Tariffs - Joseph Politano, Apricitas Economics:

The country-level tariffs announced on April 2nd exempted automobiles, car parts, steel, and aluminum because those goods were already hit with 25% universal tariffs, but the White House also published a large 37-page list of other exemptions for everything from sawdust to gold bullion to potassium chloride. The administration categorized those imports as “copper, pharmaceuticals, semiconductors, lumber articles, certain critical minerals, and energy and energy products”—and followed up days later to add specific exemptions for phones, computers, TVs, and chipmaking machinery. Those goods (with the exception of energy) map directly onto the categories of products Trump has mentioned as targets for separate 25% universal tariffs.

In effect, they have revealed the precise list of goods they plan to hit with future tariffs.

TCJA Extension Quietly Simmers

Trump’s inner circle weighs push for higher taxes on millionaires - Jeff Stein, Washington Post:

President Donald Trump’s inner circle is weighing whether the White House should back raising taxes on Americans earning more than $1 million per year as part of the GOP’s 2025 tax legislation, according to two administration officials and three other people briefed on the matter.

While the prospect of a tax hike has gotten a largely chilly reception among Republicans on Capitol Hill, Vice President JD Vance and budget director Russell Vought have expressed openness to the idea in internal administration deliberations and are viewed as supportive, said the people, who spoke on the condition of anonymity to describe private talks. Stephen K. Bannon, who served as the president’s chief strategist during his first term, has been publicly urging Trump to endorse the plan in part as a way to defang Democratic attacks on the GOP as the party of the rich.

Gingrich believes Trump has taken a tax hike on the wealthy off the table - Benjamin Guggenheim, Politico:

Gingrich posted a note on X that he said was from Trump, in which the president appeared to suggest that any tax increase, no matter how small, could doom Republicans’ electoral prospects.

“George Bush said, ‘READ MY LIPS, NO NEW TAXES,’ then proceeded to give a rather small Tax increase, and was obliterated,” the note said, referring to former President George H.W. Bush, who went on to broker a tax hike deal in 1990 with the then-Democratic-controlled Congress. “While I love the idea of a small increase, the Democrats would probably use it against us, and we would be, like Bush, helpless to do anything about it.”

Those Troublesome Budget Instructions: They Might Not Matter - Doug Sword and Cady Stanton, Tax Notes ($):

The instructions for the House in the resolution (H. Con. Res. 14) assign various committees the task of finding at least $1.5 trillion in budget cuts compared with a $4 billion instruction for the Senate. And the House has significantly different instructions on how big its tax cuts package can be and how it will be scored.

But the House can waive any objection to a violation of its instructions with a simple majority vote, while the Senate must abide by its instructions or risk losing the great advantage of reconciliation — adopting a reconciliation bill with a simple majority rather than the typical 60 votes needed to advance legislation.

Tax Policy for the Academic Win

Harvard’s Stantcheva Wins Young Economist Award for Work on Tax Policy - Alex Tanzi, Bloomberg via MSN. "Harvard University Professor Stefanie Stantcheva won the 2025 John Bates Clark Medal young economist award for her work on the impact of taxes and subsidies on private decisions."

The American Economic Association has more detail, including this: "The study uses various identification strategies with consistent results: higher taxes negatively affect the quantity but not the average quality of inventive activity. Higher taxes also cause the location of inventive activity to shift at both the state and firm level."

Blogs and Bits

2025 tax brackets and the tax rate you really pay - Kay Bell, Don't Mess With Taxes. "The tax code currently has the seven tax rates in the table shown above. Your money is taxed at the applicable different rates as your income moves up the brackets, rather than being taxed at the rate of the final bracket where all that money taken as a whole falls."

Reporting CRP Income: Nothing New, but a Common Source of Questions - Kristine Tidgren, Ag Docket. "Morehouse likely provides nonfarmers in the 8^th Circuit with substantial authority to exclude the income from SE tax liability. Those who choose this option, however, risk an assessment from the IRS in keeping with its AOD."

SE Tax, NIIT, Additional §1401 Tax - What's Up? - Annette Nellen, 21st Century Taxation. "There is ongoing litigation on what "limited partner, as such" under Section 1402(a)(13), added in 1977, means. This special rule provides that net earnings from self-employment does not include the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments for services actually rendered to or on behalf of the partnership."

Couple Hit with Negligence Penalty on "Too Good to Be True" Investment Arrangement - Parker Tax Pro Library. "The Tax Court held that Code Sec. 469 precluded a couple from claiming investment tax credits under Code Sec. 48 with respect to a purported solar farm investment where the only activity engaged in by the husband was the signing documents. The court also concluded that because the investments were part of a tax avoidance scheme that provided the couple with an arrangement that was 'too good to be true,' the couple was liable for accuracy-related penalties on their underpayment of taxes."

Run any can't-miss tax deals by your tax pro before investing.

Tax Fraud and Loan Fraud are Friends

Fresno woman sentenced to 2 years in prison for tax evasion and ordered to forfeit her mansion and BMW - IRS (Defendant name omitted, emphasis added):

Defendant, formerly of Fresno, was sentenced today to two years in prison for tax evasion and obstructing an IRS audit, Acting U.S. Attorney Michele Beckwith announced.

Defendant was also ordered to forfeit more than $2.5 million of proceeds from the sale of her and her husband’s mansion and BMW, which authorities had seized.

According to court records, from 2012 through 2015, Defendant prepared false financial statements for her husband’s orthodontics practice that significantly underreported the practice’s profits. As a result, Defendant evaded more than $870,000 that she and her husband owed in federal taxes.

Then, in early 2016, Defendant obstructed an IRS audit of her and her husband’s taxes. She altered hundreds of checks that were for their nondeductible personal expenses, such as their mortgage, utilities, landscaping, pool cleaning, cars, credit cards, and children’s college tuition, to make it appear as though the checks were for deductible business expenses. She also created false financial statements for her husband’s orthodontics practice to match the altered checks. She provided the altered checks and false financial statements to the IRS auditors to try to avoid paying the federal taxes that she and her husband actually owed.

It took a lot of work to try to fool the IRS. Wasted effort.

In June 2015, Defendant had sought a $1.5 million home mortgage refinance loan on the couple’s mansion located on Van Ness Boulevard in Fresno. To assure the bank of their creditworthiness and induce the bank to make the loan, Defendant submitted copies of her and her husband’s federal tax returns that showed significantly greater income than was reported on the actual returns they filed with the IRS. The bank declined the loan after discovering the discrepancies.

It's common for banks to require access to IRS transcripts to verify that the tax returns provided by the borrower match those filed with the IRS. But not every bank, apparently.

Then, in July 2015, Defendant applied to a second bank for a $1,475,000 home mortgage refinance loan on the Van Ness Boulevard residence. In the application, she represented that their bank accounts had a combined balance of more than $250,000 when they actually had less than $3,000. She also submitted copies of her and her husband’s federal tax returns, and a profit and loss statement, that significantly exaggerated the profitability of her husband’s orthodontics practice. As a result, the second bank approved the loan, and Defendant and her husband received $1,475,000 to which they were not entitled. Authorities later seized the residence.

I wonder if the second bank requires IRS transcripts now.

What day is it?

It's Administrative Professionals Day and National Cherry Cheesecake Day. So you know what to do for your administrative professionals.

Tax News & Views Will Not Withhold Cheesecake Roundup

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Joe B. Kristan, CPA